David Robinson, the IMF's mission chief for Saudi Arabia,
told Reuters that the euro zone debt crisis had increased the threats to the
global economy, which might have negative ramifications for the world's biggest
oil exporter.
"Key channels would be similar to those observed in
2008 and 2009. The trade channel, via a decline in hydrocarbon exports and
prices, remains the most significant, but spillovers through financial linkages
are also important," he said.
However, Saudi Arabia's near-term outlook remains strong
because of this year's surge in oil revenues, which boosted the fiscal and
external balances of the Arab world's largest economy, Robinson added.
"Gulf Cooperation Council (GCC) countries are in a
good position to undertake countercyclical policies and financial sector
support measures to mitigate the impact of the crisis, if needed,"
Robinson said in a written response to questions. 
The IMF has forecast a Saudi fiscal surplus of 9.4
percent of gross domestic product in 2011 and 8.0 percent in 2012. The country
is expected to announce its 2012 budget next week.
"At this stage, our estimates are that the level of
government spending in riyal terms will be broadly similar in 2012 as the
likely out-turn in 2011, but this will depend on the policy initiatives that
the government may choose to introduce in the budget," Robinson said. 
In its original budget for 2011, the government envisaged
spending of SR580 billion ($155 billion).
"At current oil prices we would expect to see
another fiscal surplus, about 8 percent of GDP, with no need for a drawdown in
fiscal reserves," Robinson said of next year's outlook.
"Our estimates suggest that the break-even oil price
for 2012 would be of a similar order of magnitude as in 2011, that is about $80
a barrel — this is the Arab Light price," he said, referring to minimum
oil price at which the country can balance its budget.
In its October regional economic outlook, the IMF projected
Saudi Arabia's GDP would grow 6.5 percent this year, slowing to 3.6 percent in
2012.  
 
INFLATION
Inflation in Saudi Arabia hovered below 5 percent for
most of 2011 but reached an eight-month high of 5.3 percent in September. In
October, it fell back marginally to 5.2 percent and stayed at that rate in
November.
"Global food prices have eased a little in recent
months and current futures prices do not suggest major new pressures on the
horizon," Robinson said. "The level of domestic demand is the key
question and this component has increased in recent months.
"This should continue to be monitored carefully and,
if warranted, policymakers could use a combination of fiscal and monetary
policies to ease pressures."
In its latest regional outlook, the IMF forecast annual
inflation of 5.4 percent in 2011 and 5.3 percent in 2012.
 
STOCK MARKET
Robinson also said he expected further development of the
Saudi Arabian stock market, the biggest in the Gulf, though he gave no time
frame.
Saudi Arabia has been considering a wider opening of the
market to foreign investors for several years; so far, foreigners only have
very limited opportunities to invest through indirect ownership and
exchange-traded funds that track indexes.
The appointment last week of Saudi Arabian Monetary
Agency Gov. Fahd bin Abdullah Al-Mubarak, a former investment banker and a
previous chairman of the stock exchange, was seen by analysts as a possible
step toward market opening and other economic reforms.
"One would expect to see, over time, greater depth
in the market and a broadening in the range of products offered at the stock
exchange," Robinson said.
"In turn, this could provide a broader range of
options for saving as well as additional instruments for the private sector to
finance its investment and therefore create employment." 
On other reforms, Robinson said the introduction of a
mortgage law could help the housing market. 
"Access to finance for housing from the private
sector, for example, has long been a constraint that could be addressed through
a mortgage law coupled with appropriate institutions to support and monitor
housing exposures," Robinson said. 

"Currently, the Saudi Real Estate Development Fund
(REDF) plays a key role in facilitating access to housing." 
A mortgage law which has been in planning stages for
almost a decade but it is not clear when such legislation might be passed.
Property consultancy Jones Lang LaSalle has estimated the country needs to
build up to 200,000 new homes a year for the next five years to meet demand for
about 900,000 new homes.